Corporate Compliance is a set of best practices established by organizations to prevent their employees and executives from violating legal obligations. In an increasingly demanding and complex regulatory environment, compliance with these rules becomes essential for companies. It not only helps prevent legal and financial penalties but also protects the organization’s reputation (how? Wait for it).

With globalization, companies operate in multiple jurisdictions, each with its own regulations. This adds a level of complexity that makes the implementation of robust and adaptable compliance programs essential. Interested in learning how to improve your company’s Compliance strategy? We explain everything in this article.

What is a Compliance Strategy?

In this article, we will focus on the compliance strategy, which is the action plan designed to implement and ensure the effective adherence to these policies.

A compliance strategy is a set of planned and scheduled actions, measures, or steps designed to work together to achieve a specific goal: ensuring that the organization complies with all its legal and ethical obligations.

In other words, while compliance policies are the rules and standards that the company must follow, the compliance strategy refers to how these rules and standards are practically implemented. Policies establish the “what” and the “why” of compliance, while the strategy defines the “how” and the “when.”

This strategy is defined by the Compliance Officer, who must consider the organization’s context, the maturity level of the compliance program, and the available resources to achieve the proposed objectives.

The resources available to the Compliance Officer can vary significantly, both in quantity and accessibility. However, an effective compliance strategy focuses on:

  • Planned Actions: Defining and executing specific actions that ensure compliance with established policies.
  • Concrete Measures: Implementing measures to monitor and evaluate adherence to regulations.
  • Scheduled Steps: Establishing a clear timeline for the implementation and review of compliance policies and procedures.

The ideal compliance strategy is one that facilitates the achievement of objectives by making balanced and rational use of available resources. Achieving this balance requires following some key recommendations:

  • Evaluate the Organizational Context: Understand the company’s structure, culture, and operations to design an appropriate strategy.
  • Determine the Maturity Level of the Compliance Program: Assess the current level of implementation and effectiveness of compliance policies.
  • Efficiently Allocate Resources: Ensure that human, technological, and informational resources are well-distributed and optimally used.
  • Establish Success Indicators: Define clear metrics to measure the progress and effectiveness of the compliance strategy.

How to achieve a flawless compliance strategy? Here are 7 infallible tips!

1) Understand and Thoroughly Know Your Organization’s Culture

To implement an effective compliance strategy, it is essential to understand and thoroughly know your organization’s culture. A culture of compliance cannot be imposed overnight; it develops over time and can vary significantly from one company to another.

In some organizations, a culture of compliance permeates every corner. This may result from the continued efforts of a previously established compliance office or be a reflection of leadership. When a company’s leadership values and actively promotes compliance, employees typically follow that example, greatly facilitating the work of compliance officers.

However, not all organizations have a strong culture of compliance. In those where this aspect has not advanced much, more effort is required to build it. The strategy for developing a compliance culture will differ and require more resources in these companies.

To understand your organization’s culture, conduct an in-depth analysis of the company. This analysis should include:

  • History of Legal Compliance Issues: Review past incidents of non-compliance, penalties, and corrective measures implemented. This history provides a basis for understanding recurring risk areas.
  • Diagnosis of the Current Situation: Evaluate the company’s current state of legal compliance. This includes reviewing existing policies and procedures and assessing employees’ perceptions of compliance. Interviews, internal surveys, and audits can be useful tools for this diagnosis.

Once past events and the current state of the organization are understood, you can more precisely determine how the Corporate Compliance program should be structured. This knowledge allows you to tailor the strategy to the company’s specific needs and organizational culture.

2) Understand the Regulatory Environment

For an effective compliance strategy, it is crucial to know and understand the regulatory environment in which your company operates. What is the regulatory framework? A few words about Europe.

At the European level, the regulatory environment is equally demanding and constantly changing. Some of the most important regulations affecting companies throughout the EU include:

  • General Data Protection Regulation (GDPR): Enforced in May 2018, it is one of the strictest regulations regarding personal data protection. GDPR imposes severe penalties for non-compliance and requires companies to take proactive measures to protect the data of EU citizens.
  • Payment Services Directive (PSD2): This directive aims to increase the security of electronic payments and promote innovation in payment services. It requires companies to implement enhanced authentication measures and encourages competition in the payment sector.
  • Markets in Financial Instruments Directive (MiFID II): Regulates securities markets in the EU, improving transparency and protecting investors. Companies must comply with strict reporting and transparency requirements and ensure that their financial services are fair and clear to customers.

Since the regulatory environment is constantly evolving, it is crucial for companies to stay updated with regulatory changes. Some strategies to achieve this include:

  • Subscribing to legal update newsletters
  • Participating in seminars and conferences
  • Joining industry associations
  • Utilizing compliance technology and tools

3) Update Your Policies and Procedures

Compliance policies should not be static; they need to be updated when regulatory changes occur or new laws and regulations affecting the company and its activities are enacted, as previously mentioned.

Because the regulatory and legal environment in which companies operate is constantly changing, new laws, regulations, and guidelines are regularly introduced. It is crucial that compliance policies reflect these changes.

If policies remain static, they can become obsolete and fail to meet current legal requirements, putting the company at risk. Therefore, it is necessary to:

  • Constantly Monitor the Regulatory Environment: Stay informed about legislative and regulatory developments that may affect the company. As mentioned earlier, this can be achieved through legal newsletters, participation in seminars, and collaboration with industry associations.
  • Internal Evaluation: Analyze how regulatory changes impact the company’s operations. This analysis should involve relevant departments to ensure a comprehensive understanding of the implications.
  • Review and Draft New Policies: Once the impact of regulatory changes is identified, it is necessary to review and, if needed, draft new policies or procedures. This includes updating existing documents and creating new protocols that align with new regulations.
  • Approval and Adoption: Revised policies must be approved by senior management and officially adopted by the company. This step is crucial to ensure that the policies have the necessary authority and support.
  • Continuous Training: Providing regular training on updated compliance policies is essential to keep employees informed and engaged. Training should be interactive and practical, focusing on real-life scenarios that employees may encounter.

4) ALWAYS Analyze Risks

Risk analysis is a cornerstone of any effective compliance strategy. Its purpose is to identify, assess, and mitigate the risks the company faces, allowing for proactive management and informed decision-making. By creating a risk map, compliance officers can clearly visualize and communicate the specific risks affecting the organization.

What is a risk map? A risk map is an essential tool that graphically represents identified risks. It is usually presented in a two-dimensional grid, where one axis shows the frequency or probability of occurrence and the other axis represents the financial impact or severity of the risk.

This visual representation helps prioritize risks, focusing on those with high frequency and high severity.

The work of identifying and evaluating risks allows the compliance officer to know the exact points where the problems lie. This process involves several steps:

  • Risk Identification
  • Risk Evaluation
  • Creation of the Risk Map
  • Risk Management

Applicable laws and regulations should serve as the basis for identifying compliance risks. Depending on the company’s context (geographic location, activity, products or services, organizational structure, and number of employees), the necessary measures and controls to be included in the compliance policies can be determined.

5) Foster Open Communication Throughout the Company

For a compliance strategy to be effective, it is essential to foster open and transparent communication throughout the organization. Compliance policies must be known and understood by all members (yes, all!) of the company, and this can only be achieved through effective and constant communication. This communication must also be clear and accessible.

How to do it:

  • Corporate Intranet: An internal site where employees can easily access all compliance policies and procedures.
  • Informative Newsletters: Regular emails highlighting key policies and any relevant updates.
  • Meetings and Workshops: Periodic sessions where compliance policies are discussed, and employee questions are answered.

Effective communication is not just a one-way process where management informs employees about compliance policies. It is equally important to foster two-way communication, where employees feel comfortable raising questions, making suggestions, and reporting possible non-compliance. This can be achieved through:

  • Clear Communication Channels
  • Culture of Openness and Transparency
  • Regular Feedback

6) Provide Whistleblower Channels to Company Members

To ensure the effectiveness of a compliance strategy, it is essential to implement an internal whistleblowing channel that allows company members to report breaches of the implemented compliance policies. This channel must be accessible, confidential, and ensure the protection of whistleblowers against any form of retaliation.

An effective whistleblowing channel must meet several essential criteria to ensure its utility and credibility within the organization:

  • Ease of Use
  • Confidentiality and Anonymity
  • Protection Against Retaliation
  • Responsible Management

It is equally important to discourage the misuse of the whistleblowing channel. This includes the submission of false reports or using it as a mere complaint box. To prevent these abuses, it is advisable to clearly define what types of reports are appropriate for the channel and which are not. These criteria should be communicated to all employees and provide training on the proper use of the whistleblowing channel and the consequences of making false reports.

7) Implement Automation Technologies

Today, companies face increasingly complex regulations and greater pressure to comply with them. Therefore, the implementation of automation technologies has become a necessity.

One area where automation can have a significant impact is in the Know Your Business (KYB) process. This process involves verifying the identity and legitimacy of the businesses you deal with and is crucial for preventing fraud, money laundering, and other illegal activities. Automating the KYB process can offer multiple benefits, including:

  • Improved Efficiency: Automation reduces the time and resources needed to complete verifications. Instead of staff spending hours or days manually investigating each business, an automated system can perform these tasks in minutes.
  • Increased Accuracy: Automated systems can reduce the risk of human errors, ensuring that verifications are carried out with greater accuracy and consistency.
  • Continuous Compliance: Automated solutions can be easily updated to comply with new regulations, ensuring that the company is always up to date with its compliance obligations.

Implementing automation technologies in the compliance area not only improves efficiency and accuracy but also helps resolve several common problems faced by organizations:

  • Cost Reduction: By automating resource-intensive processes, companies can significantly reduce their operational costs.
  • Risk Mitigation: Automation can help identify and mitigate risks more effectively. Automated systems can analyze large volumes of data to detect suspicious patterns that might be overlooked in manual analysis.
  • Improved Decision-Making: With access to accurate and real-time data, compliance officers can make more informed and timely decisions.
  • Simplified Audits: Automated systems can generate detailed and comprehensive records of all compliance activities, facilitating both internal and external audits.

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